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1 ALESHIRE & WYNDER, LLP Exempt from filing fee pursuant to
STEPHEN R. ONSTOT, State Bar No. 139319 Government Code § 6103
2
sonstot@awattorneys.com ELECTRONICALLY
CHRISTINE M. CARSON, State Bar No. 188603
3
ccarson@awattorneys.com F I L E D
Superior Court of California,
4 2361 Rosecrans Avenue, Suite 475 County of San Francisco
El Segundo, CA 90245 03/22/2021
5 Telephone: (310) 527-6660 Clerk of the Court
BY: EDWARD SANTOS
Facsimile: (310) 532-7395 Deputy Clerk
6
7 Attorneys for Real Party in Interest
MUNICIPAL WATER DISTRICT OF ORANGE
8 COUNTY
9
10
11
SUPERIOR COURT OF THE STATE OF CALIFORNIA
12
FOR THE COUNTY OF SAN FRANCISCO
13
14 SAN DIEGO COUNTY WATER AUTHORITY, Case No.: CPF-14-514004
15 Petitioner and Plaintiff, Assigned for all purposes to the
Hon. Anne-Christine Massullo, Dept. 304
16 vs.
MUNICIPAL WATER DISTRICT OF
17 ORANGE COUNTY’S ANSWER TO
THE METROPOLITAN WATER DISTRICT SAN DIEGO COUNTY WATER
18 OF SOUTHERN CALIFORNIA, ALL AUTHORITY’S FIRST AMENDED
PERSONS INTERESTED IN THE PETITION FOR WRIT OF MANDATE
19 VALIDITY OF THE RATES ADOPTED BY AND COMPLAINT
THE METROPOLITAN WATER DISTRICT
20 OF SOUTHERN CALIFORNIA ON APRIL 8,
2014 TO BE EFFECTIVE JANUARY 1, 2015
21 AND JANUARY 1, 2016; and DOES 1-10,
22 Respondents and Defendants.
23
24
Pursuant to Code of Civil Procedure1 § 860, et seq., Real Party In Interest MUNICIPAL
25
WATER DISTRICT OF ORANGE COUNTY (“MWDOC”) hereby answers the first, second,
26
27
28 1
All Code references are to the California Code unless otherwise noted.
01143.0001/704061.2 CMC
MUNICIPAL WATER DISTRICT OF ORANGE COUNTY’S ANSWER TO 1ST AM. PETITION
1 third, and fifth causes of action2 in Petitioner and Plaintiff San Diego County Water Authority’s
2 (“San Diego”) unverified First Amended Petition for Writ of Mandate and Complaint For
3 Determination of Invalidity, Damages and Declaratory Relief (“FAC”), as follows:
4 GENERAL DENIAL
5 Pursuant to Code of Civil Procedure section 431.30(d), MWDOC generally denies each
6 and every allegation in the FAC, and further denies that San Diego is entitled to any of the relief
7 prayed for in the FAC.
8 GENERAL ALLEGATIONS IN SUPPORT OF GENERAL DENIAL AND
9 AFFIRMATIVE DEFENSES
10 Metropolitan, a Collective of Public Member Agencies
11 1. Respondent and Defendant Metropolitan Water District of Southern California
12 (“Metropolitan”) is a public agency and a regional wholesale water provider. It exists and
13 operates as a collective of its member agencies, which themselves are public agencies, and it is
14 governed by a Board of Directors composed of representatives from each member agency. Today,
15 Metropolitan has 26 member agencies, including San Diego.
16 2. Each member agency has proportional representation on the Board of Directors,
17 and is entitled to at least one seat on the Board, plus an additional seat for every full 3% of the
18 total assessed value of the property within the member agency’s service area that is taxable for
19 district purposes. Currently, the Board is made up of 38 directors: 23 of the agencies have no
20 more than two directors, two agencies – San Diego and Municipal Water District of Orange
21 County – each have four, and City of Los Angeles Department of Water and Power has five. Each
22 director is guaranteed one vote, which may be weighted more heavily depending on the property
23 valuation in his or her agency’s service area. San Diego controls approximately 18% of the
24 Board’s vote.
25 3. MWDOC, like San Diego, is a Metropolitan member agency. MWDOC, like
26 SDCWA, is a Metropolitan member agency. MWDOC is a wholesale water supplier and
27 2
MWDOC does not answer the fourth cause of action for breach of contract against Metropolitan
28 Water District of Southern California and therefore is not a party to the claims made with respect
to that cause of action, including to the extent they appear in the causes of action answered here.
01143.0001/704061.2 CMC 2
MUNICIPAL WATER DISTRICT OF ORANGE COUNTY’S ANSWER TO 1ST AM. PETITION
1 resource planning agency. It serves all of Orange County, with the exception of the cities of
2 Anaheim, Fullerton and Santa Ana, through retail water agencies. MWDOC meets over half of
3 the Orange County water demands through water it obtains from Respondent and Defendant
4 Metropolitan. MWDOC has the right to, and does, purchase water from Metropolitan.
5 Metropolitan’s Rates
6 4. MWDOC, like San Diego, participated in the public Board of Directors’ meetings,
7 hearings, and workshops leading up to the Board’s adoption of the rate components challenged by
8 San Diego.
9 5. In order to provide its wholesale water service to its member agencies,
10 Metropolitan imports water from the Colorado River via the Colorado River Aqueduct and from
11 the State Water Project (“SWP”), which is operated by the California Department of Water
12 Resources (“DWR”). The water is delivered to member agencies through an extensive
13 interconnected regional network of canals, pipelines, and appurtenant facilities, as well as supply,
14 treatment, and storage facilities. The extensive statewide integrated conveyance and distribution
15 system is the result of collective investment by the cooperative since Metropolitan’s formation in
16 1928. To pay for its activities, Metropolitan presently collects ad valorem property taxes from
17 real property within its service area and water rates and charges that Metropolitan’s Board of
18 Directors, comprised solely of member agency representatives, sets for services Metropolitan
19 provides to those member agencies.
20 6. Metropolitan has provided two services to its member agencies for which it has
21 charged established rates: (1) full service water service in which Metropolitan supplies and
22 transports water; and (2) short-term “wheeling” service, in which Metropolitan transports water
23 supplied by others. The rate for full service water includes supply and transportation rate
24 components.
25 7. San Diego in part challenges the pre-set rate for wheeling service applicable to
26 Metropolitan’s wheeling service to its member agencies on wheeling transactions for a duration
27 of one year or less (“pre-set wheeling rate”). The pre-set wheeling rate was set by Metropolitan’s
28 Board over two decades ago and was addressed in Metropolitan Water Dist. of So. Cal. v.
01143.0001/704061.2 CMC 3
MUNICIPAL WATER DISTRICT OF ORANGE COUNTY’S ANSWER TO 1ST AM. PETITION
1 Imperial Irrigation Dist., et al. (“Imperial”), 80 Cal. App. 4th 1403, 1407 (2000) and San Diego
2 County Water Authority v. Metropolitan Water Dist. of So. Cal. (“SDCWA”), 12 Cal. App. 5th
3 1124, 1135 (2017).
4 8. In January 1997, Metropolitan’s Board of Directors first voted to adopt the pre-set
5 wheeling rate, effective January 15, 1997. “Wheeling” generally refers to use of a public agency’s
6 facilities to convey water that is not owned by the agency, if there is unused capacity, in exchange
7 for fair compensation. Water Code §§ 1810 et seq. (the “Wheeling Statutes”) (applying to use of
8 up to 70 percent of the facility’s unused capacity); SDCWA, 12 Cal. App. 5th at 1135; Imperial,
9 80 Cal. App. 4th at 1407. Metropolitan’s pre-set wheeling rate for short-term wheeling to member
10 agencies avoided the need for negotiations with its own members over the price it would charge
11 for these short-term transactions, other than any applicable offsetting benefits credit that may
12 apply to a particular transaction and certain other matters. Imperial, 80 Cal. App. 4th at 1407,
13 1434.
14 9. In 1997, Metropolitan’s Board of Directors adopted Resolution 8520, following
15 consultation and collaboration with its member agencies. Resolution 8520 supported the new
16 wheeling service for member agencies and the pre-set wheeling rate and it also included findings
17 that ensured compliance with the Wheeling Statutes. See SDCWA, 12 Cal. App. 5th at 1135. The
18 definition of short-term wheeling service for member agencies was added to Metropolitan
19 Administrative Code Section 4119 and the pre-set wheeling rate for that service was added to
20 Section 4405.
21 10. Among other things, Resolution 8520 established the specific short-term service,
22 the basis for the pre-set wheeling rate for that service, and also accounted for “offsetting
23 benefits.” The Wheeling Statutes provide that wheeling service cannot be denied by the owner of
24 a conveyance system if “fair compensation” is offered, and subject to a list of specified
25 conditions. Water Code, § 1810. “Fair compensation” is defined as including the costs incurred
26 by the owner, minus a credit for “offsetting benefits” if the wheeling transaction provides benefits
27 to the owner for use of the conveyance system. Water Code, § 1811, subd. (c). Resolution 8520
28 accounted for “offsetting benefits” of the defined short-term wheeling transactions with its
01143.0001/704061.2 CMC 4
MUNICIPAL WATER DISTRICT OF ORANGE COUNTY’S ANSWER TO 1ST AM. PETITION
1 member agencies by providing that Metropolitan shall determine whether any such offsetting
2 benefits exist on “a case-by-case basis in response to a particular wheeling transaction.”
3 Resolution 8520, Section 10; Imperial, 80 Cal. App. 4th at 1420.
4 11. In 2000, the California Court of Appeal held that Metropolitan may have a pre-set
5 wheeling rate, including the methodology of pre-setting a rate and leaving the determination of
6 offsetting benefits, if any, on a case-by-case basis based on a particular transaction. The Court of
7 Appeal held that the Wheeling Statutes did not as a matter of law prevent Metropolitan from
8 having a fixed, pre-set rate for a particular type of short-term wheeling transactions with its
9 member agencies, rather than setting a price based on each transaction. Imperial, 80 Cal. App. 4th
10 at 1407-08. The Court noted that under Resolution 8520, “Metropolitan will provide offsetting
11 benefits on a case-by-case basis.” Id. at 1420. The Court explained that Metropolitan’s pre-set
12 wheeling rate “simplifies the factors to be considered in setting the rate for a particular
13 transaction. The Metropolitan Water District need only modify the fixed rate as applied to a
14 proposed wheeling transaction after considering any necessitated power costs, treatment costs,
15 replacement costs, or offsetting benefits.” Id. at 1434 (emphasis added).
16 12. Twenty years after that appellate decision, San Diego now alleges this
17 methodology approved by the Court of Appeal violates the same Wheeling Statutes reviewed by
18 that Court. San Diego alleges Metropolitan failed to credit offsetting benefits when it set its pre-
19 set wheeling rate on April 15, 2014. For the same reasons the pre-set wheeling rate did not violate
20 the Wheeling Statutes in 1997, there is no violation of the Wheeling Statutes in 2014: the
21 supporting Resolution provides for offsetting benefits if applicable in a given transaction.
22 Additionally, no member agency including San Diego presented any request to Metropolitan for
23 wheeling service subject to the pre-set wheeling rate challenged by San Diego in the years in
24 question in this lawsuit. Therefore, Metropolitan could not have refused to apply a credit for
25 offsetting benefits to any transaction subject to the pre-set wheeling rate.
26 13. San Diego also challenges a different aspect of Metropolitan’s pre-set wheeling
27 rate, as well as the transportation rate components of the full service rate. San Diego alleges the
28 Water Stewardship Rate, a component of the pre-set wheeling rate and also a transportation-
01143.0001/704061.2 CMC 5
MUNICIPAL WATER DISTRICT OF ORANGE COUNTY’S ANSWER TO 1ST AM. PETITION
1 related component of the full service rate, should be allocated solely to Metropolitan’s supply
2 function and not to any function that is recovered through Metropolitan’s transportation-related
3 rate components. The Water Stewardship Rate recovers costs that Metropolitan uses to fund
4 demand management programs to develop and conserve local water supplies in member agencies’
5 service areas. The demand management programs help increase water supply reliability, reduce
6 imported water demands, decrease the burden on Metropolitan’s infrastructure, reduce system
7 costs, and free up conveyance capacity.
8 14. In addition, the demand management programs help Metropolitan meet its unique
9 legislative mandate under Senate Bill 60, codified in Metropolitan Water District Act § 130.5, to
10 “expand water conservation, water recycling, and groundwater recovery efforts,” and “place
11 increased emphasis on sustainable, environmentally sound, and cost-effective water conservation,
12 recycling, and groundwater storage and replenishment measures,” with annual reports on its
13 progress to the Legislature. SB 60 further directed, as codified in Metropolitan Water District Act
14 § 130.7, that Metropolitan participate, in cooperation with its member agencies and others, in
15 considering groundwater recharge and replenishment and other programs utilizing the resource
16 potential of Southern California rivers, including storm water runoff. Metropolitan’s annual
17 progress reports to the Legislature document the amount of water developed and conserved
18 through its demand management programs.
19 15. Overall, Metropolitan’s demand management programs provide benefits to all
20 member agencies regardless of the location of the local resource development project or the
21 conservation measure. In helping to increase water supply reliability, the demand management
22 programs do not create or conserve Metropolitan’s water supply. The water developed and
23 conserved through the demand management programs instead is at the local level, within
24 Metropolitan’s member agencies’ service area. The financial impact of this for Metropolitan, and
25 thus for its member agencies, is the reduction in conveyance system costs that would have
26 otherwise been charged to member agencies under Metropolitan’s transportation-related rate
27 components. By managing demand on Metropolitan, the demand management programs reduce
28 the need to import water from the Colorado River and the Bay Delta into Metropolitan’s service
01143.0001/704061.2 CMC 6
MUNICIPAL WATER DISTRICT OF ORANGE COUNTY’S ANSWER TO 1ST AM. PETITION
1 area. As a result, Metropolitan reduces the costs it would have to spend to expand, operate,
2 maintain, replace, and refurbish its entire system if demands on Metropolitan were higher. By
3 reducing the need to import water into the service area, Metropolitan also frees up conveyance
4 capacity within its system, making that capacity available for other transactions.
5 16. In the late 1990s, Metropolitan began a revision of its overall water rates and
6 charges, again in consultation and cooperation with San Diego and Metropolitan’s other member
7 agencies. On October 16, 2001, Metropolitan’s Board of Directors, representing each member
8 agency, voted to adopt a revised rate structure to be effective January 1, 2003. Among other
9 things, this rate structure unbundled water rates and charges to reflect the different functions
10 within the services provided by Metropolitan and more transparently allocated costs to those
11 functions. Among the unbundled rates in the new structure were: (1) a “System Access Rate”
12 charged on every acre-foot of water conveyed through Metropolitan’s conveyance system,
13 whether the water is purchased from Metropolitan or is non-Metropolitan water; (2) a “Water
14 Stewardship Rate,” also charged on every acre-foot of water conveyed through Metropolitan’s
15 conveyance system and used to fund conservation and other demand management programs; and
16 (3) a “System Power Rate,” which recovers the costs of moving Metropolitan’s water along its
17 system and also reflects the benefits Metropolitan receives when it produces energy as a result of
18 moving water along its system. The Board assigned two of these new rate components – the
19 System Access Rate and the Water Stewardship Rate – to the pre-set wheeling rate. The Board
20 also included in the pre-set wheeling rate a treatment surcharge (for treated water), actual power
21 costs unless the wheeling party provided its own power, and an administrative fee.
22 17. The conservation and local supply development programs funded by the Water
23 Stewardship Rate provide conveyance services and benefits to all member agencies, and the
24 Water Stewardship Rate applicable to all member agencies is properly treated as a conveyance
25 charge. The conveyance benefits afforded by demand management programs include preserved
26 conveyance capacity and reduced capital and operational expenditures on additional new
27 conveyance capacity. As stated, the programs do not create a supply resource for Metropolitan to
28 serve to its member agencies or to use in any way, but rather develop and conserve water at the
01143.0001/704061.2 CMC 7
MUNICIPAL WATER DISTRICT OF ORANGE COUNTY’S ANSWER TO 1ST AM. PETITION
1 local level, and the costs that are reduced are conveyance costs that would otherwise be charged
2 in transportation rates that all member agencies pay. Therefore, the costs are not treated as supply
3 charges.
4 18. By 2001, when Metropolitan adopted its unbundled rate structure and allocated the
5 Water Stewardship Rate as a conveyance charge, it followed the reasoning of experts in the area
6 of demand management and the United States Environmental Protection Agency (“EPA”).
7 During that time and in the years since, experts and the EPA all published reports concluding that
8 investments in demand management programs resulted in decreasing water agencies’ need to
9 spend greater amounts of money in additional infrastructure, operations, and maintenance that
10 would have been necessary if demands would not have been reduced.
11 19. Additionally, Metropolitan analyzed the effect investments in demand
12 management would have specifically for Metropolitan. In 1996, Metropolitan performed analyses
13 in connection with its long-term regional planning, which forecast that investments in demand
14 management programs would avoid specific conveyance infrastructure projects that would be
15 needed to meet anticipated increased demands. Metropolitan’s 1996 Integrated Resource Plan
16 (“IRP”) included an analysis of future demand scenarios and their effect on infrastructure
17 requirements over the next 25 years. A comparison of capital infrastructure costs with and
18 without demand management programs showed a difference of around $2 billion through 2020.
19 In other words, the ability to meet demand through demand management programs resulted in
20 what was back in 1996 an anticipated $2 billion savings in capital costs. A sensitivity analysis in
21 1996 further showed that a 5% increase or decrease in demand had a correlative effect on when
22 Metropolitan would need to incur capital infrastructure costs.
23 20. The Metropolitan Board’s decision to recover the Water Stewardship Rate
24 component as a conveyance charge was therefore informed and supported by the extensive
25 independent expert reports, government studies, and Metropolitan’s own analysis of the specific
26 projects it would avoid by investing in demand management instead of expanding conveyance-
27 related infrastructure.
28
01143.0001/704061.2 CMC 8
MUNICIPAL WATER DISTRICT OF ORANGE COUNTY’S ANSWER TO 1ST AM. PETITION
1 21. As stated, revenues from the Water Stewardship Rate element of Metropolitan’s
2 rate structure are used by Metropolitan to support water conservation and local resource
3 development programs. The programs provide incentives for development by member agencies or
4 their customers of new water resources – such as through recycling, seawater desalination, and
5 groundwater recovery projects – and water conservation, at the local level within Metropolitan’s
6 service area, thereby reducing the need for Metropolitan to import water into the area. All
7 member agencies benefit from the water developed and conserved through these programs, by
8 reducing the need to invest in the development of and maintain additional and larger, more
9 expensive water delivery infrastructure, as well as free up capacity in Metropolitan’s system.
10 22. Metropolitan implements the local water development programs by entering into
11 long-term contracts with a Metropolitan member agency, or a Metropolitan member agency and
12 that agency’s own member agency (and also sometimes other parties) that provides financial
13 incentives for the Metropolitan member agency or its own member agency to create their own
14 locally produced water supply, based on program criteria. Metropolitan also funds programs to
15 reduce water use through conservation by providing incentives directly to consumers, such as
16 conservation device rebates and turf removal incentives; funding to member agencies to
17 implement their own conservation programs; and education and community outreach.
18 23. These local resource development and water conservation programs are an
19 important component of Metropolitan’s IRP, which is Metropolitan’s long-term planning
20 mechanism to ensure that the decreased demand on Metropolitan enhances its ability to provide
21 its services to the Southern California region for the long-term future. Since 1996, the IRP has
22 been updated three times, in 2004, 2010, and 2015, each reaffirming demand management
23 remains an important part of Metropolitan’s long-term planning.
24 24. Metropolitan’s demand management funding is significant. From 1998 to 2018,
25 Metropolitan spent nearly $1.3 billion on this funding. San Diego and its service area have always
26 been one of the highest recipients of demand management funding from Metropolitan, applying
27 for substantial sums that Metropolitan has provided. From 1998 to 2018, San Diego received
28 nearly $205 million in demand management funding from Metropolitan. In comparison to the
01143.0001/704061.2 CMC 9
MUNICIPAL WATER DISTRICT OF ORANGE COUNTY’S ANSWER TO 1ST AM. PETITION
1 other 25 member agencies, San Diego was at least the third highest recipient of demand
2 management funding overall; the third highest recipient of local resource development funding;
3 and the second highest recipient of conservation funding. San Diego is slated to become the
4 highest recipient of funding based on new local resource project funding commitments
5 Metropolitan has made. For example, in 2019, Metropolitan’s Board approved two local resource
6 project agreements with San Diego and two of San Diego’s member agencies for Pure Water
7 recycling projects, with committed funding by Metropolitan of up to $328 million.
8 25. Metropolitan conducted a look-back analysis in 2016 and again in 2018 to assess
9 the conveyance system cost savings through demand management that were forecast in 1996 at
10 the beginning of the 25-year IRP capital planning period. As stated, that forecast had estimated
11 that demand management programs could save Metropolitan (meaning its member agencies)
12 approximately $2 billion in deferred and avoided capital infrastructure costs. The 2016 and 2018
13 look-back analyses found the demand management programs had in fact saved Metropolitan (its
14 member agencies) significant sums in deferred and avoided capital infrastructure costs, and even
15 more than had been forecast: approximately $3 billion.
16 26. The 25-year capital planning period of the IRP concluded in 2020. Accordingly, a
17 new phase began in 2021 in regard to the relationship between demand management,
18 Metropolitan’s future capital planning, and Metropolitan’s cost structure. Consequently, in April
19 2018, the Metropolitan Board directed a study of the most appropriate method for the allocation
20 and recovery of demand management costs going forward after 2020.
21 27. As part of this forward-looking demand management study, in a first phase, Peter
22 Mayer, P.E., Principal of Water Demand Management, LLC (“WaterDM”) conducted an analysis
23 to determine the most appropriate method for assigning demand management costs to
24 Metropolitan’s system functions. In August 2019, Mr. Mayer issued a Report on Functional
25 Assignment of Metropolitan’s Demand Management Costs. Mr. Mayer found that Metropolitan’s
26 demand management occurs at the local level and decreases the burden on Metropolitan’s
27 infrastructure, reduces system costs, and frees up conveyance capacity to the benefit of all system
28 users. Mr. Mayer further found that Metropolitan’s approach for recovering demand management
01143.0001/704061.2 CMC 10
MUNICIPAL WATER DISTRICT OF ORANGE COUNTY’S ANSWER TO 1ST AM. PETITION
1 costs is widely accepted in the water industry and has been proven effective. In light of the
2 completion of the 25-year capital planning period and changed circumstances going forward, Mr.
3 Mayer recommended a methodology for updating Metropolitan’s functional assignment of
4 demand management program costs after 2020.
5 28. In a second phase, Richard Giardina, Senior Vice President of Raftelis, conducted
6 an analysis to incorporate the phase one recommendations into the cost-of-service process and
7 develop demand management cost recovery mechanisms, whether through Metropolitan’s
8 existing rate and charge structure or alternative cost recovery mechanisms. Mr. Giardina issued a
9 Demand Management Cost Recovery Alternatives Report in December 2019, in which he
10 concluded that four proposed alternatives, some of which involved the allocation of costs to the
11 conveyance function in Metropolitan’s rates, were each reasonable and consistent with industry
12 guidelines and standards. Mr. Giardina advised that it was a policy decision of the Metropolitan
13 Board to determine which alternative is most appropriate for Metropolitan to adopt.
14 29. In December 2019, the Metropolitan Board considered the proposed alternatives
15 for a future demand management cost recovery mechanism, and decided to continue the study
16 through a rate refinement workgroup of staff representatives of the member agencies.
17 Consequently, the Board voted in April 2020 to suspend use of the Water Stewardship Rate in
18 2021 and 2022 during the workgroup’s efforts, and to fund demand management in these years
19 with reserve funds from the Water Stewardship Fund. The member agency rate refinement
20 workgroup study, which includes San Diego, continues to date, along with Metropolitan’s work
21 on its most recent IRP update.
22 30. By the time it adopts rates in April 2022 for 2023 and 2024, the Metropolitan
23 Board is expected to consider the most appropriate cost recovery mechanism for demand
24 management costs for the future. The Water Stewardship Reserve fund, relied upon for demand
25 management funding commitments in 2021 and 2022, is not sufficient to maintain indefinite
26 funding of demand management costs, particularly with the new commitments for local resource
27 projects Metropolitan has entered into with San Diego.
28
01143.0001/704061.2 CMC 11
MUNICIPAL WATER DISTRICT OF ORANGE COUNTY’S ANSWER TO 1ST AM. PETITION
1 31. In SDCWA, 12 Cal. App. 5th 1124, the Court of Appeal in part considered the
2 sufficiency of the record for the years 2011 to 2014 to support Metropolitan’s inclusion of the
3 Water Stewardship Rate in the pre-set wheeling rate. Based on the record before it, the Court held
4 the pre-set wheeling rate was valid, except to the extent this included the Water Stewardship Rate
5 component. The Court found the record for 2011 to 2014 lacked substantial evidence to support
6 including the Water Stewardship Rate in those years. SDCWA, 12 Cal. App. 5th at 1130, 1149,
7 1150-51. The Court of Appeal’s decision did not address Metropolitan’s inclusion of the Water
8 Stewardship Rate in the pre-set wheeling rate in subsequent years, including the years at issue in
9 the present case, based on a different record with additional support for allocating demand
10 management costs to transportation rather than supply.
11 32. San Diego not only seeks invalidation of the Water Stewardship Rate’s inclusion
12 in the pre-set wheeling rate, but also seeks a writ of mandate prospectively commanding
13 Metropolitan on the manner of setting the pre-set wheeling rate and demand management cost
14 recovery in the future.
15 33. However, in August 18, 2020, the Metropolitan Board of Directors repealed the
16 pre-set wheeling rate and Resolution 8520. By that time, no transactions governed by the pre-set
17 wheeling rate had occurred in over 10 years. Since the Board’s action in August 2020, the price
18 for all wheeling by member agencies, regardless of duration, will be set based on each
19 transaction, as is the case for third-party wheeling transactions and wheeling to member agencies
20 for more than one year. And, as stated, the Metropolitan Board has suspended use of the Water
21 Stewardship Rate pending its forward-looking demand management cost recovery study.
22 34. San Diego also alleges in its fifth cause of action that Metropolitan’s rates and
23 charges for the services it provides to its member agencies are subject to the requirements of the
24 constitutional provisions added by the passage of Proposition 26 in 2010. However, those
25 requirements apply to exactments that are “imposed” on ratepayers. For multiple reasons,
26 Metropolitan’s rates and charges are not imposed on San Diego or its other member agency
27 ratepayers. Metropolitan is a voluntary cooperative of its member agencies, and is governed by a
28 Board of Directors comprised only of the representatives of its members. Metropolitan has only
01143.0001/704061.2 CMC 12
MUNICIPAL WATER DISTRICT OF ORANGE COUNTY’S ANSWER TO 1ST AM. PETITION
1 26 customers – its 26 member agencies – and those customers through the representative Board
2 set the rates and charges that are applicable to themselves and no others. Consequently, the rates
3 and charges are voluntarily set by the customers, including San Diego, which comprise a
4 voluntary cooperative. Metropolitan’s rates and charges are also not imposed because San Diego
5 is not required to utilize Metropolitan’s system. The Court of Appeal has not yet decided the issue
6 of whether Metropolitan’s rates and charges are imposed and, therefore, whether Proposition 26
7 applies to Metropolitan’s rates and charges. SDCWA, 12 Cal. App. 5th at 1152-53 (noting
8 Metropolitan’s position that Proposition 26 is inapplicable because its rates are not imposed;
9 declining to decide that issue by holding “whether or not ‘imposed’” the System Access Rate and
10 System Power Rate comply with constitutional requirements). In any event, Metropolitan’s rates
11 and charges are collected for a service and do not exceed the reasonable costs of providing the
12 service and/or are fees for the use of Metropolitan’s services. The manner in which the rates and
13 charges are allocated to a member agency bears a fair or reasonable relationship to the member
14 agency’s burdens on, or benefits received from, Metropolitan.
15
16 SPECIFIC AFFIRMATIVE DEFENSES
17 MWDOC asserts the following affirmative defenses to the claims for relief made against it
18 in the FAC without admitting it has the burden of proof on any of the issues raised below:
19 First Affirmative Defense
20 (Failure to Name Real Parties in Interest)
21 MWDOC incorporates by reference the General Allegations stated above.
22 San Diego fails to name the 25 other Metropolitan member agencies, whose interests are
23 directly at issue in this litigation and in whose absence complete relief cannot be accorded
24 among San Diego and Metropolitan, pursuant to Code of Civil Procedure § 389(a).
25 Second Affirmative Defense
26 (Failure to State Facts Sufficient to Constitute a Cause of Action)
27 MWDOC incorporates by reference the General Allegations stated above.
28
01143.0001/704061.2 CMC 13
MUNICIPAL WATER DISTRICT OF ORANGE COUNTY’S ANSWER TO 1ST AM. PETITION
1 San Diego fails to state facts in its FAC sufficient to constitute a cause of action on which
2 relief can be granted. Among other grounds, San Diego fails to state a violation of Proposition 26,
3 i.e., Article XIII C, § 1, subdivision (e) of the California Constitution (adopted by Proposition
4 26), Government Code § 50076, Government Code § 54999.7(a), Government Code § 66013,
5 Water Code §§ 1810 et seq., the Metropolitan Water District Act, or the common law, and/or
6 these laws are not applicable to the facts alleged in the FAC. Moreover, San Diego fails to allege
7 it engaged in any transaction with Metropolitan that is subject to the pre-set wheeling rate it
8 challenges in the first through third causes of action, which was previously set by the
9 Metropolitan Board of Directors pursuant to former Metropolitan Administrative Code Sections
10 4119 and 4405.
11 Third Affirmative Defense
12 (Statute of Limitations)
13 MWDOC incorporates by reference the General Allegations stated above.
14 San Diego’s claims are barred in whole or in part by the applicable statutes of limitations,
15 including but not limited to, Code of Civil Procedure §§ 337, 338(a) and 343, Government Code
16 §§ 945.4, 945.6, and 945.8.
17 Fourth Affirmative Defense
18 (California Government Claims Act)
19 MWDOC incorporates by reference the General Allegations stated above.
20 Those portions of San Diego’s claims for relief that may implicate the California
21 Government Claims Act, are barred in whole or in part because San Diego failed to comply with
22 all provisions of the Government Claims Act, including but not limited to Government Code §§
23 901, 905.2, 910 et seq., 911.2, 911.3, 911.4, 935, 945.4, and 946.6, and the Metropolitan Water
24 District of Southern California Administrative Code §§ 9300-9310, including by failing to timely
25 file a claim, and failed to timely file a court action relieving it from its failure to timely present a
26 claim, as required by Government Code §§ 945.4 and 945.6, and the Metropolitan
27 Administrative Code. Among other reasons, San Diego did not reference “offsetting benefits”
28 anywhere in its written communications to Metropolitan (attached to the FAC). San Diego
01143.0001/704061.2 CMC 14
MUNICIPAL WATER DISTRICT OF ORANGE COUNTY’S ANSWER TO 1ST AM. PETITION
1 does not allege it made any such request to Metropolitan, as a claim or otherwise. The
2 monetary relief sought in the FAC is barred by the claim presentation requirements in
3 Government Code §§ 900 et seq.
4 Fifth Affirmative Defense
5 (Laches)
6 MWDOC incorporates by reference the General Allegations stated above.
7 San Diego’s claims are barred by the doctrine of laches.
8 Sixth Affirmative Defense
9 (Exercise of Administrative Discretion)
10 MWDOC incorporates by reference the General Allegations stated above.
11 Metropolitan has no ministerial duty to structure its rates in the manner alleged by San
12 Diego. Rather, the legal directives under which Metropolitan operates broadly leave the design of
13 water rates to Metropolitan’s sound discretion and the majority vote of Metropolitan’s Board of
14 Directors.
15 The applicable legal standards for Metropolitan’s rates are reasonableness, resulting in
16 revenue which will pay the costs of the district, and uniform for like classes of service.
17 Metropolitan’s principal act, the Metropolitan Water District Act, states that Metropolitan “shall
18 fix the rate or rates at which water shall be sold” (Cal. Water Code § 109-133), and that those
19 rates shall recover sufficient revenue, together with other sources of revenue, to fund all of
20 Metropolitan’s costs and “shall be uniform for like classes of service throughout the district” (id.
21 at § 109-134). The state common law applicable to Metropolitan’s rates calls for rates to be
22 reasonable. The California Supreme Court has stated: “Reasonableness . . . i
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PEOPLE CENTER, INC. D/B/A RIPPLING, A DELAWARE VS. ASURE PAYROLL TAX MANAGEMENT LLC, A DELAWARE LLC ET AL
Jul 11, 2024 |
CGC24615613
Matter on the Law & Motion calendar for Thursday, July 11, 2024, Line 15. PLAINTIFF PEOPLE CENTER, INC. D/B/A RIPPLING's Motion For Preliminary Injunction. Plaintiff People Center, Inc. d/b/a Rippling's motion for a preliminary injunction is denied. (The Court's complete tentative ruling has been emailed to the parties.) For the 1:30 p.m. Law & Motion calendar, all attorneys and parties may appear in Department 302 remotely. Remote hearings will be conducted by videoconference using Zoom. To appear remotely at the hearing, go to the court's website at sfsuperiorcourt.org under "Online Services," navigate to "Tentative Rulings," and click on the appropriate link, or dial the corresponding phone number. Any party who contests a tentative ruling must send an email to contestdept302tr@sftc.org with a copy to all other parties by 4pm stating, without argument, the portion(s) of the tentative ruling that the party contests. The subject line of the email shall include the line number, case name and case number. The text of the email shall include the name and contact information, including email address, of the attorney or party who will appear at the hearing. Counsel for the prevailing party is required to prepare a proposed order which repeats verbatim the substantive portion of the tentative ruling and must email it to contestdept302tr@sftc.org prior to the hearing even if the tentative ruling is not contested. The court no longer provides a court reporter in the Law & Motion Department. Parties may retain their own reporter, who may appear in the courtroom or remotely. A retained reporter must be a California certified court reporter (CSR), for only a CSR's transcript may be used in California courts. If a CSR is being retained, include in your email all of the following: their name, CSR and telephone numbers, and their individual work email address. =(302/RBU)
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A & A GENERAL BUILDING CONSTRUCTION INC., A VS. ARLENE S. TASIM ET AL
Jul 12, 2024 |
CGC23609755
Matter on the Law & Motion calendar for Friday, July 12, 2024, Line 12. DEFENDANT ARLENE TASIM AND ALI TASIM'S Motion For Sanctions Against A A General Building Construction Inc. Pursuant To Code Of Civil Procedure Section 1281.99. Defendants and Cross-Complainants' unopposed Motion for Sanctions in the amount of $8350.00 is granted (CCP section 1281.99), payment to be made within 30 days of the filing of this order. Friday's Law & Motion Calendar will be called out of Dept. 301. Anyone intending to appear in person should report to Dept. 301. However, anyone intending to appear remotely should use the regular Zoom information for Dept. 302's Law & Motion Calendar for 9:30 a.m. To appear remotely at the hearing, go to the court's website at sfsuperiorcourt.org under "Online Services," navigate to "Tentative Rulings," and click on the appropriate link, or dial the corresponding phone number. Any party who contests a tentative ruling must send an email to contestdept302tr@sftc.org with a copy to all other parties by 4pm stating, without argument, the portion(s) of the tentative ruling that the party contests. The subject line of the email shall include the line number, case name and case number. The text of the email shall include the name and contact information, including email address, of the attorney or party who will appear at the hearing. Counsel for the prevailing party is required to prepare a proposed order which repeats verbatim the substantive portion of the tentative ruling and must email it to contestdept302tr@sftc.org prior to the hearing even if the tentative ruling is not contested. The court no longer provides a court reporter in the Law & Motion Department. Parties may retain their own reporter, who may appear in the courtroom or remotely. A retained reporter must be a California certified court reporter (CSR), for only a CSR's transcript may be used in California courts. If a CSR is being retained, include in your email all of the following: their name, CSR and telephone numbers, and their individual work email address. =(302/RCE)
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YOLANDA JONES ET AL VS. GENERAL MOTORS, LLC ET AL
Jul 10, 2024 |
CGC23609805
Matter on the Law & Motion calendar for Wednesday, July 10, 2024, Line 10. 2 - DEFENDANT GENERAL MOTORS, LLC's MOTION TO STRIKE 1ST Amended COMPLAINT. Off calendar. The Quezada declaration fails to show that the parties met and conferred "in person, by telephone, or by video conference" in compliance with CCP 435.5. The parties are ordered to comply with the code. The response to the complaint is now due August 7, 2024. For the 9:30 a.m. Law & Motion calendar, all attorneys and parties may appear in Department 302 remotely. Remote hearings will be conducted by videoconference using Zoom. To appear remotely at the hearing, go to the court's website at sfsuperiorcourt.org under "Online Services," navigate to "Tentative Rulings," and click on the appropriate link, or dial the corresponding phone number. Any party who contests a tentative ruling must send an email to contestdept302tr@sftc.org with a copy to all other parties by 4pm stating, without argument, the portion(s) of the tentative ruling that the party contests. The subject line of the email shall include the line number, case name and case number. The text of the email shall include the name and contact information, including email address, of the attorney or party who will appear at the hearing. The court no longer provides a court reporter in the Law & Motion Department. Parties may retain their own reporter, who may appear in the courtroom or remotely. A retained reporter must be a California certified court reporter (CSR), for only a CSR's transcript may be used in California courts. If a CSR is being retained, include in your email all of the following: their name, CSR and telephone numbers, and their individual work email address. =(302/RBU)
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EDWARD WESTERMAN VS. FTI CONSULTING, INC. ET AL
Jul 09, 2024 |
CGC24615152
Matter on the Law & Motion Calendar for Tuesday, July 9, 2024, Line 12. PLAINTIFF EDWARD WESTERMAN's Motion To Seal. Plaintiff's unopposed motion to seal is granted. For the 9:30 a.m. Law & Motion calendar, all attorneys and parties may appear in Department 302 remotely. Remote hearings will be conducted by videoconference using Zoom. To appear remotely at the hearing, go to the court's website at sfsuperiorcourt.org under "Online Services," navigate to "Tentative Rulings," and click on the appropriate link, or dial the corresponding phone number. Any party who contests a tentative ruling must send an email to contestdept302tr@sftc.org with a copy to all other parties by 4pm stating, without argument, the portion(s) of the tentative ruling that the party contests. The subject line of the email shall include the line number, case name and case number. The text of the email shall include the name and contact information, including email address, of the attorney or party who will appear at the hearing. Counsel for the prevailing party is required to prepare a proposed order which repeats verbatim the substantive portion of the tentative ruling and must email it to contestdept302tr@sftc.org prior to the hearing even if the tentative ruling is not contested. The court no longer provides a court reporter in the Law & Motion Department. Parties may retain their own reporter, who may appear in the courtroom or remotely. A retained reporter must be a California certified court reporter (CSR), for only a CSR's transcript may be used in California courts. If a CSR is being retained, include in your email all of the following: their name, CSR and telephone numbers, and their individual work email address. =(302/RBU)
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CLEAR HOMES LLC, A NEW MEXICO LIMITED LIABILITY VS. BRENDAN MICHAEL WEE ET AL
Jul 11, 2024 |
CGC23607972
Real Property/Housing Court Law and Motion Calendar for July 11, 2024 line 2. DEFENDANT BRENDAN WEE, ERIKA HILTON MOTION FOR JUDGMENT ON THE PLEADINGS is Off Calendar - Per request of moving party. =(501/HEK) Parties may appear in-person, telephonically or via Zoom (Video - Webinar ID: 160 560 5023; Password: 172849; or Phone Dial in: (669) 254-5252; Webinar ID: 160 560 5023; Password: 172849). Parties who intend to appear at the hearing must give notice to opposing parties and the court promptly, but no later than 4:00 p.m. the court day before the hearing unless the tentative ruling has specified that a hearing is required. Notice of contesting a tentative ruling shall be provided by sending an email to the court to Department501ContestTR@sftc.org with a copy to all other parties stating, without argument, the portion(s) of the tentative ruling that the party contests. A party may not argue at the hearing if the opposing party is not so notified and the opposing party does not appear.
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ELIANE DOS SANTOS VITAL, AN INDIVIDUAL ET AL VS. AMERICAN HONDA MOTOR CO., INC., A CALIFORNIA ET AL
Jul 12, 2024 |
CGC22601133
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Y.P. VS. WELLS FARGO & COMPANY, ET AL
Jul 10, 2024 |
CGC24613065
Matter on the Law & Motion calendar for Wednesday, July 10, 2024, Line 12. DEFENDANT EARL IGNACIO AND WELLS FARGO BANK, N.A.'s Motion To Compel Arbitration. Defendants Wells Fargo Bank, N.A. and Earl Ignacio's motion to compel arbitration and stay is denied. (The Court's complete tentative ruling has been emailed to the parties.) For the 9:30 a.m. Law & Motion calendar, all attorneys and parties may appear in Department 302 remotely. Remote hearings will be conducted by videoconference using Zoom. To appear remotely at the hearing, go to the court's website at sfsuperiorcourt.org under "Online Services," navigate to "Tentative Rulings," and click on the appropriate link, or dial the corresponding phone number. Any party who contests a tentative ruling must send an email to contestdept302tr@sftc.org with a copy to all other parties by 4pm stating, without argument, the portion(s) of the tentative ruling that the party contests. The subject line of the email shall include the line number, case name and case number. The text of the email shall include the name and contact information, including email address, of the attorney or party who will appear at the hearing. Counsel for the prevailing party is required to prepare a proposed order which repeats verbatim the substantive portion of the tentative ruling and must email it to contestdept302tr@sftc.org prior to the hearing even if the tentative ruling is not contested. The court no longer provides a court reporter in the Law & Motion Department. Parties may retain their own reporter, who may appear in the courtroom or remotely. A retained reporter must be a California certified court reporter (CSR), for only a CSR's transcript may be used in California courts. If a CSR is being retained, include in your email all of the following: their name, CSR and telephone numbers, and their individual work email address. =(302/RBU)
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MARY ELIZABETH LEMASTERS VS. SCHOENBERG FAMILY LAW GROUP P.C. ET AL
Jul 09, 2024 |
CGC22600572
Matter on the Law & Motion Calendar for Tuesday, July 9, 2024, Line 4. PLAINTIFF MARY LEMASTERS' MOTION FOR WITHDRAWAL OF ATTORNEY OF RECORD. Hearing required. For the 9:30 a.m. Law & Motion calendar, all attorneys and parties may appear in Department 302 remotely. Remote hearings will be conducted by videoconference using Zoom. To appear remotely at the hearing, go to the court's website at sfsuperiorcourt.org under "Online Services," navigate to "Tentative Rulings," and click on the appropriate link, or dial the corresponding phone number. Any party who contests a tentative ruling must send an email to contestdept302tr@sftc.org with a copy to all other parties by 4pm stating, without argument, the portion(s) of the tentative ruling that the party contests. The subject line of the email shall include the line number, case name and case number. The text of the email shall include the name and contact information, including email address, of the attorney or party who will appear at the hearing. The court no longer provides a court reporter in the Law & Motion Department. Parties may retain their own reporter, who may appear in the courtroom or remotely. A retained reporter must be a California certified court reporter (CSR), for only a CSR's transcript may be used in California courts. If a CSR is being retained, include in your email all of the following: their name, CSR and telephone numbers, and their individual work email address. =(302/RBU)
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JOHN P BERNARD VS. BMW OF NORTH AMERICA, LLC ET AL
Jul 10, 2024 |
CGC23608339
Matter on the Law & Motion calendar for Wednesday, July 10, 2024, Line 8. PLAINTIFF JOHN BERNARD's Motion For Award Of Attorneys Fees, Costs, And Expenses. Off calendar for noncompliance with Local Rule 2.7(B) (courtesy copies). The motion may be re-set for a Mon.-Thurs. after July 24, with papers to bear new hearing date. In meantime, counsel shall meet and confer to resolve their differences. For the 9:30 a.m. Law & Motion calendar, all attorneys and parties may appear in Department 302 remotely. Remote hearings will be conducted by videoconference using Zoom. To appear remotely at the hearing, go to the court's website at sfsuperiorcourt.org under "Online Services," navigate to "Tentative Rulings," and click on the appropriate link, or dial the corresponding phone number. Any party who contests a tentative ruling must send an email to contestdept302tr@sftc.org with a copy to all other parties by 4pm stating, without argument, the portion(s) of the tentative ruling that the party contests. The subject line of the email shall include the line number, case name and case number. The text of the email shall include the name and contact information, including email address, of the attorney or party who will appear at the hearing. The court no longer provides a court reporter in the Law & Motion Department. Parties may retain their own reporter, who may appear in the courtroom or remotely. A retained reporter must be a California certified court reporter (CSR), for only a CSR's transcript may be used in California courts. If a CSR is being retained, include in your email all of the following: their name, CSR and telephone numbers, and their individual work email address. =(302/RBU)
Preview
1 ALESHIRE & WYNDER, LLP Exempt from filing fee pursuant to STEPHEN R. ONSTOT, State Bar No. 139319 Government Code § 6103 2 sonstot@awattorneys.com ELECTRONICALLY CHRISTINE M. CARSON, State Bar No. 188603 3 ccarson@awattorneys.com F I L E D Superior Court of California, 4 2361 Rosecrans Avenue, Suite 475 County of San Francisco El Segundo, CA 90245 03/22/2021 5 Telephone: (310) 527-6660 Clerk of the Court BY: EDWARD SANTOS Facsimile: (310) 532-7395 Deputy Clerk 6 7 Attorneys for Real Party in Interest MUNICIPAL WATER DISTRICT OF ORANGE 8 COUNTY 9 10 11 SUPERIOR COURT OF THE STATE OF CALIFORNIA 12 FOR THE COUNTY OF SAN FRANCISCO 13 14 SAN DIEGO COUNTY WATER AUTHORITY, Case No.: CPF-14-514004 15 Petitioner and Plaintiff, Assigned for all purposes to the Hon. Anne-Christine Massullo, Dept. 304 16 vs. MUNICIPAL WATER DISTRICT OF 17 ORANGE COUNTY’S ANSWER TO THE METROPOLITAN WATER DISTRICT SAN DIEGO COUNTY WATER 18 OF SOUTHERN CALIFORNIA, ALL AUTHORITY’S FIRST AMENDED PERSONS INTERESTED IN THE PETITION FOR WRIT OF MANDATE 19 VALIDITY OF THE RATES ADOPTED BY AND COMPLAINT THE METROPOLITAN WATER DISTRICT 20 OF SOUTHERN CALIFORNIA ON APRIL 8, 2014 TO BE EFFECTIVE JANUARY 1, 2015 21 AND JANUARY 1, 2016; and DOES 1-10, 22 Respondents and Defendants. 23 24 Pursuant to Code of Civil Procedure1 § 860, et seq., Real Party In Interest MUNICIPAL 25 WATER DISTRICT OF ORANGE COUNTY (“MWDOC”) hereby answers the first, second, 26 27 28 1 All Code references are to the California Code unless otherwise noted. 01143.0001/704061.2 CMC MUNICIPAL WATER DISTRICT OF ORANGE COUNTY’S ANSWER TO 1ST AM. PETITION 1 third, and fifth causes of action2 in Petitioner and Plaintiff San Diego County Water Authority’s 2 (“San Diego”) unverified First Amended Petition for Writ of Mandate and Complaint For 3 Determination of Invalidity, Damages and Declaratory Relief (“FAC”), as follows: 4 GENERAL DENIAL 5 Pursuant to Code of Civil Procedure section 431.30(d), MWDOC generally denies each 6 and every allegation in the FAC, and further denies that San Diego is entitled to any of the relief 7 prayed for in the FAC. 8 GENERAL ALLEGATIONS IN SUPPORT OF GENERAL DENIAL AND 9 AFFIRMATIVE DEFENSES 10 Metropolitan, a Collective of Public Member Agencies 11 1. Respondent and Defendant Metropolitan Water District of Southern California 12 (“Metropolitan”) is a public agency and a regional wholesale water provider. It exists and 13 operates as a collective of its member agencies, which themselves are public agencies, and it is 14 governed by a Board of Directors composed of representatives from each member agency. Today, 15 Metropolitan has 26 member agencies, including San Diego. 16 2. Each member agency has proportional representation on the Board of Directors, 17 and is entitled to at least one seat on the Board, plus an additional seat for every full 3% of the 18 total assessed value of the property within the member agency’s service area that is taxable for 19 district purposes. Currently, the Board is made up of 38 directors: 23 of the agencies have no 20 more than two directors, two agencies – San Diego and Municipal Water District of Orange 21 County – each have four, and City of Los Angeles Department of Water and Power has five. Each 22 director is guaranteed one vote, which may be weighted more heavily depending on the property 23 valuation in his or her agency’s service area. San Diego controls approximately 18% of the 24 Board’s vote. 25 3. MWDOC, like San Diego, is a Metropolitan member agency. MWDOC, like 26 SDCWA, is a Metropolitan member agency. MWDOC is a wholesale water supplier and 27 2 MWDOC does not answer the fourth cause of action for breach of contract against Metropolitan 28 Water District of Southern California and therefore is not a party to the claims made with respect to that cause of action, including to the extent they appear in the causes of action answered here. 01143.0001/704061.2 CMC 2 MUNICIPAL WATER DISTRICT OF ORANGE COUNTY’S ANSWER TO 1ST AM. PETITION 1 resource planning agency. It serves all of Orange County, with the exception of the cities of 2 Anaheim, Fullerton and Santa Ana, through retail water agencies. MWDOC meets over half of 3 the Orange County water demands through water it obtains from Respondent and Defendant 4 Metropolitan. MWDOC has the right to, and does, purchase water from Metropolitan. 5 Metropolitan’s Rates 6 4. MWDOC, like San Diego, participated in the public Board of Directors’ meetings, 7 hearings, and workshops leading up to the Board’s adoption of the rate components challenged by 8 San Diego. 9 5. In order to provide its wholesale water service to its member agencies, 10 Metropolitan imports water from the Colorado River via the Colorado River Aqueduct and from 11 the State Water Project (“SWP”), which is operated by the California Department of Water 12 Resources (“DWR”). The water is delivered to member agencies through an extensive 13 interconnected regional network of canals, pipelines, and appurtenant facilities, as well as supply, 14 treatment, and storage facilities. The extensive statewide integrated conveyance and distribution 15 system is the result of collective investment by the cooperative since Metropolitan’s formation in 16 1928. To pay for its activities, Metropolitan presently collects ad valorem property taxes from 17 real property within its service area and water rates and charges that Metropolitan’s Board of 18 Directors, comprised solely of member agency representatives, sets for services Metropolitan 19 provides to those member agencies. 20 6. Metropolitan has provided two services to its member agencies for which it has 21 charged established rates: (1) full service water service in which Metropolitan supplies and 22 transports water; and (2) short-term “wheeling” service, in which Metropolitan transports water 23 supplied by others. The rate for full service water includes supply and transportation rate 24 components. 25 7. San Diego in part challenges the pre-set rate for wheeling service applicable to 26 Metropolitan’s wheeling service to its member agencies on wheeling transactions for a duration 27 of one year or less (“pre-set wheeling rate”). The pre-set wheeling rate was set by Metropolitan’s 28 Board over two decades ago and was addressed in Metropolitan Water Dist. of So. Cal. v. 01143.0001/704061.2 CMC 3 MUNICIPAL WATER DISTRICT OF ORANGE COUNTY’S ANSWER TO 1ST AM. PETITION 1 Imperial Irrigation Dist., et al. (“Imperial”), 80 Cal. App. 4th 1403, 1407 (2000) and San Diego 2 County Water Authority v. Metropolitan Water Dist. of So. Cal. (“SDCWA”), 12 Cal. App. 5th 3 1124, 1135 (2017). 4 8. In January 1997, Metropolitan’s Board of Directors first voted to adopt the pre-set 5 wheeling rate, effective January 15, 1997. “Wheeling” generally refers to use of a public agency’s 6 facilities to convey water that is not owned by the agency, if there is unused capacity, in exchange 7 for fair compensation. Water Code §§ 1810 et seq. (the “Wheeling Statutes”) (applying to use of 8 up to 70 percent of the facility’s unused capacity); SDCWA, 12 Cal. App. 5th at 1135; Imperial, 9 80 Cal. App. 4th at 1407. Metropolitan’s pre-set wheeling rate for short-term wheeling to member 10 agencies avoided the need for negotiations with its own members over the price it would charge 11 for these short-term transactions, other than any applicable offsetting benefits credit that may 12 apply to a particular transaction and certain other matters. Imperial, 80 Cal. App. 4th at 1407, 13 1434. 14 9. In 1997, Metropolitan’s Board of Directors adopted Resolution 8520, following 15 consultation and collaboration with its member agencies. Resolution 8520 supported the new 16 wheeling service for member agencies and the pre-set wheeling rate and it also included findings 17 that ensured compliance with the Wheeling Statutes. See SDCWA, 12 Cal. App. 5th at 1135. The 18 definition of short-term wheeling service for member agencies was added to Metropolitan 19 Administrative Code Section 4119 and the pre-set wheeling rate for that service was added to 20 Section 4405. 21 10. Among other things, Resolution 8520 established the specific short-term service, 22 the basis for the pre-set wheeling rate for that service, and also accounted for “offsetting 23 benefits.” The Wheeling Statutes provide that wheeling service cannot be denied by the owner of 24 a conveyance system if “fair compensation” is offered, and subject to a list of specified 25 conditions. Water Code, § 1810. “Fair compensation” is defined as including the costs incurred 26 by the owner, minus a credit for “offsetting benefits” if the wheeling transaction provides benefits 27 to the owner for use of the conveyance system. Water Code, § 1811, subd. (c). Resolution 8520 28 accounted for “offsetting benefits” of the defined short-term wheeling transactions with its 01143.0001/704061.2 CMC 4 MUNICIPAL WATER DISTRICT OF ORANGE COUNTY’S ANSWER TO 1ST AM. PETITION 1 member agencies by providing that Metropolitan shall determine whether any such offsetting 2 benefits exist on “a case-by-case basis in response to a particular wheeling transaction.” 3 Resolution 8520, Section 10; Imperial, 80 Cal. App. 4th at 1420. 4 11. In 2000, the California Court of Appeal held that Metropolitan may have a pre-set 5 wheeling rate, including the methodology of pre-setting a rate and leaving the determination of 6 offsetting benefits, if any, on a case-by-case basis based on a particular transaction. The Court of 7 Appeal held that the Wheeling Statutes did not as a matter of law prevent Metropolitan from 8 having a fixed, pre-set rate for a particular type of short-term wheeling transactions with its 9 member agencies, rather than setting a price based on each transaction. Imperial, 80 Cal. App. 4th 10 at 1407-08. The Court noted that under Resolution 8520, “Metropolitan will provide offsetting 11 benefits on a case-by-case basis.” Id. at 1420. The Court explained that Metropolitan’s pre-set 12 wheeling rate “simplifies the factors to be considered in setting the rate for a particular 13 transaction. The Metropolitan Water District need only modify the fixed rate as applied to a 14 proposed wheeling transaction after considering any necessitated power costs, treatment costs, 15 replacement costs, or offsetting benefits.” Id. at 1434 (emphasis added). 16 12. Twenty years after that appellate decision, San Diego now alleges this 17 methodology approved by the Court of Appeal violates the same Wheeling Statutes reviewed by 18 that Court. San Diego alleges Metropolitan failed to credit offsetting benefits when it set its pre- 19 set wheeling rate on April 15, 2014. For the same reasons the pre-set wheeling rate did not violate 20 the Wheeling Statutes in 1997, there is no violation of the Wheeling Statutes in 2014: the 21 supporting Resolution provides for offsetting benefits if applicable in a given transaction. 22 Additionally, no member agency including San Diego presented any request to Metropolitan for 23 wheeling service subject to the pre-set wheeling rate challenged by San Diego in the years in 24 question in this lawsuit. Therefore, Metropolitan could not have refused to apply a credit for 25 offsetting benefits to any transaction subject to the pre-set wheeling rate. 26 13. San Diego also challenges a different aspect of Metropolitan’s pre-set wheeling 27 rate, as well as the transportation rate components of the full service rate. San Diego alleges the 28 Water Stewardship Rate, a component of the pre-set wheeling rate and also a transportation- 01143.0001/704061.2 CMC 5 MUNICIPAL WATER DISTRICT OF ORANGE COUNTY’S ANSWER TO 1ST AM. PETITION 1 related component of the full service rate, should be allocated solely to Metropolitan’s supply 2 function and not to any function that is recovered through Metropolitan’s transportation-related 3 rate components. The Water Stewardship Rate recovers costs that Metropolitan uses to fund 4 demand management programs to develop and conserve local water supplies in member agencies’ 5 service areas. The demand management programs help increase water supply reliability, reduce 6 imported water demands, decrease the burden on Metropolitan’s infrastructure, reduce system 7 costs, and free up conveyance capacity. 8 14. In addition, the demand management programs help Metropolitan meet its unique 9 legislative mandate under Senate Bill 60, codified in Metropolitan Water District Act § 130.5, to 10 “expand water conservation, water recycling, and groundwater recovery efforts,” and “place 11 increased emphasis on sustainable, environmentally sound, and cost-effective water conservation, 12 recycling, and groundwater storage and replenishment measures,” with annual reports on its 13 progress to the Legislature. SB 60 further directed, as codified in Metropolitan Water District Act 14 § 130.7, that Metropolitan participate, in cooperation with its member agencies and others, in 15 considering groundwater recharge and replenishment and other programs utilizing the resource 16 potential of Southern California rivers, including storm water runoff. Metropolitan’s annual 17 progress reports to the Legislature document the amount of water developed and conserved 18 through its demand management programs. 19 15. Overall, Metropolitan’s demand management programs provide benefits to all 20 member agencies regardless of the location of the local resource development project or the 21 conservation measure. In helping to increase water supply reliability, the demand management 22 programs do not create or conserve Metropolitan’s water supply. The water developed and 23 conserved through the demand management programs instead is at the local level, within 24 Metropolitan’s member agencies’ service area. The financial impact of this for Metropolitan, and 25 thus for its member agencies, is the reduction in conveyance system costs that would have 26 otherwise been charged to member agencies under Metropolitan’s transportation-related rate 27 components. By managing demand on Metropolitan, the demand management programs reduce 28 the need to import water from the Colorado River and the Bay Delta into Metropolitan’s service 01143.0001/704061.2 CMC 6 MUNICIPAL WATER DISTRICT OF ORANGE COUNTY’S ANSWER TO 1ST AM. PETITION 1 area. As a result, Metropolitan reduces the costs it would have to spend to expand, operate, 2 maintain, replace, and refurbish its entire system if demands on Metropolitan were higher. By 3 reducing the need to import water into the service area, Metropolitan also frees up conveyance 4 capacity within its system, making that capacity available for other transactions. 5 16. In the late 1990s, Metropolitan began a revision of its overall water rates and 6 charges, again in consultation and cooperation with San Diego and Metropolitan’s other member 7 agencies. On October 16, 2001, Metropolitan’s Board of Directors, representing each member 8 agency, voted to adopt a revised rate structure to be effective January 1, 2003. Among other 9 things, this rate structure unbundled water rates and charges to reflect the different functions 10 within the services provided by Metropolitan and more transparently allocated costs to those 11 functions. Among the unbundled rates in the new structure were: (1) a “System Access Rate” 12 charged on every acre-foot of water conveyed through Metropolitan’s conveyance system, 13 whether the water is purchased from Metropolitan or is non-Metropolitan water; (2) a “Water 14 Stewardship Rate,” also charged on every acre-foot of water conveyed through Metropolitan’s 15 conveyance system and used to fund conservation and other demand management programs; and 16 (3) a “System Power Rate,” which recovers the costs of moving Metropolitan’s water along its 17 system and also reflects the benefits Metropolitan receives when it produces energy as a result of 18 moving water along its system. The Board assigned two of these new rate components – the 19 System Access Rate and the Water Stewardship Rate – to the pre-set wheeling rate. The Board 20 also included in the pre-set wheeling rate a treatment surcharge (for treated water), actual power 21 costs unless the wheeling party provided its own power, and an administrative fee. 22 17. The conservation and local supply development programs funded by the Water 23 Stewardship Rate provide conveyance services and benefits to all member agencies, and the 24 Water Stewardship Rate applicable to all member agencies is properly treated as a conveyance 25 charge. The conveyance benefits afforded by demand management programs include preserved 26 conveyance capacity and reduced capital and operational expenditures on additional new 27 conveyance capacity. As stated, the programs do not create a supply resource for Metropolitan to 28 serve to its member agencies or to use in any way, but rather develop and conserve water at the 01143.0001/704061.2 CMC 7 MUNICIPAL WATER DISTRICT OF ORANGE COUNTY’S ANSWER TO 1ST AM. PETITION 1 local level, and the costs that are reduced are conveyance costs that would otherwise be charged 2 in transportation rates that all member agencies pay. Therefore, the costs are not treated as supply 3 charges. 4 18. By 2001, when Metropolitan adopted its unbundled rate structure and allocated the 5 Water Stewardship Rate as a conveyance charge, it followed the reasoning of experts in the area 6 of demand management and the United States Environmental Protection Agency (“EPA”). 7 During that time and in the years since, experts and the EPA all published reports concluding that 8 investments in demand management programs resulted in decreasing water agencies’ need to 9 spend greater amounts of money in additional infrastructure, operations, and maintenance that 10 would have been necessary if demands would not have been reduced. 11 19. Additionally, Metropolitan analyzed the effect investments in demand 12 management would have specifically for Metropolitan. In 1996, Metropolitan performed analyses 13 in connection with its long-term regional planning, which forecast that investments in demand 14 management programs would avoid specific conveyance infrastructure projects that would be 15 needed to meet anticipated increased demands. Metropolitan’s 1996 Integrated Resource Plan 16 (“IRP”) included an analysis of future demand scenarios and their effect on infrastructure 17 requirements over the next 25 years. A comparison of capital infrastructure costs with and 18 without demand management programs showed a difference of around $2 billion through 2020. 19 In other words, the ability to meet demand through demand management programs resulted in 20 what was back in 1996 an anticipated $2 billion savings in capital costs. A sensitivity analysis in 21 1996 further showed that a 5% increase or decrease in demand had a correlative effect on when 22 Metropolitan would need to incur capital infrastructure costs. 23 20. The Metropolitan Board’s decision to recover the Water Stewardship Rate 24 component as a conveyance charge was therefore informed and supported by the extensive 25 independent expert reports, government studies, and Metropolitan’s own analysis of the specific 26 projects it would avoid by investing in demand management instead of expanding conveyance- 27 related infrastructure. 28 01143.0001/704061.2 CMC 8 MUNICIPAL WATER DISTRICT OF ORANGE COUNTY’S ANSWER TO 1ST AM. PETITION 1 21. As stated, revenues from the Water Stewardship Rate element of Metropolitan’s 2 rate structure are used by Metropolitan to support water conservation and local resource 3 development programs. The programs provide incentives for development by member agencies or 4 their customers of new water resources – such as through recycling, seawater desalination, and 5 groundwater recovery projects – and water conservation, at the local level within Metropolitan’s 6 service area, thereby reducing the need for Metropolitan to import water into the area. All 7 member agencies benefit from the water developed and conserved through these programs, by 8 reducing the need to invest in the development of and maintain additional and larger, more 9 expensive water delivery infrastructure, as well as free up capacity in Metropolitan’s system. 10 22. Metropolitan implements the local water development programs by entering into 11 long-term contracts with a Metropolitan member agency, or a Metropolitan member agency and 12 that agency’s own member agency (and also sometimes other parties) that provides financial 13 incentives for the Metropolitan member agency or its own member agency to create their own 14 locally produced water supply, based on program criteria. Metropolitan also funds programs to 15 reduce water use through conservation by providing incentives directly to consumers, such as 16 conservation device rebates and turf removal incentives; funding to member agencies to 17 implement their own conservation programs; and education and community outreach. 18 23. These local resource development and water conservation programs are an 19 important component of Metropolitan’s IRP, which is Metropolitan’s long-term planning 20 mechanism to ensure that the decreased demand on Metropolitan enhances its ability to provide 21 its services to the Southern California region for the long-term future. Since 1996, the IRP has 22 been updated three times, in 2004, 2010, and 2015, each reaffirming demand management 23 remains an important part of Metropolitan’s long-term planning. 24 24. Metropolitan’s demand management funding is significant. From 1998 to 2018, 25 Metropolitan spent nearly $1.3 billion on this funding. San Diego and its service area have always 26 been one of the highest recipients of demand management funding from Metropolitan, applying 27 for substantial sums that Metropolitan has provided. From 1998 to 2018, San Diego received 28 nearly $205 million in demand management funding from Metropolitan. In comparison to the 01143.0001/704061.2 CMC 9 MUNICIPAL WATER DISTRICT OF ORANGE COUNTY’S ANSWER TO 1ST AM. PETITION 1 other 25 member agencies, San Diego was at least the third highest recipient of demand 2 management funding overall; the third highest recipient of local resource development funding; 3 and the second highest recipient of conservation funding. San Diego is slated to become the 4 highest recipient of funding based on new local resource project funding commitments 5 Metropolitan has made. For example, in 2019, Metropolitan’s Board approved two local resource 6 project agreements with San Diego and two of San Diego’s member agencies for Pure Water 7 recycling projects, with committed funding by Metropolitan of up to $328 million. 8 25. Metropolitan conducted a look-back analysis in 2016 and again in 2018 to assess 9 the conveyance system cost savings through demand management that were forecast in 1996 at 10 the beginning of the 25-year IRP capital planning period. As stated, that forecast had estimated 11 that demand management programs could save Metropolitan (meaning its member agencies) 12 approximately $2 billion in deferred and avoided capital infrastructure costs. The 2016 and 2018 13 look-back analyses found the demand management programs had in fact saved Metropolitan (its 14 member agencies) significant sums in deferred and avoided capital infrastructure costs, and even 15 more than had been forecast: approximately $3 billion. 16 26. The 25-year capital planning period of the IRP concluded in 2020. Accordingly, a 17 new phase began in 2021 in regard to the relationship between demand management, 18 Metropolitan’s future capital planning, and Metropolitan’s cost structure. Consequently, in April 19 2018, the Metropolitan Board directed a study of the most appropriate method for the allocation 20 and recovery of demand management costs going forward after 2020. 21 27. As part of this forward-looking demand management study, in a first phase, Peter 22 Mayer, P.E., Principal of Water Demand Management, LLC (“WaterDM”) conducted an analysis 23 to determine the most appropriate method for assigning demand management costs to 24 Metropolitan’s system functions. In August 2019, Mr. Mayer issued a Report on Functional 25 Assignment of Metropolitan’s Demand Management Costs. Mr. Mayer found that Metropolitan’s 26 demand management occurs at the local level and decreases the burden on Metropolitan’s 27 infrastructure, reduces system costs, and frees up conveyance capacity to the benefit of all system 28 users. Mr. Mayer further found that Metropolitan’s approach for recovering demand management 01143.0001/704061.2 CMC 10 MUNICIPAL WATER DISTRICT OF ORANGE COUNTY’S ANSWER TO 1ST AM. PETITION 1 costs is widely accepted in the water industry and has been proven effective. In light of the 2 completion of the 25-year capital planning period and changed circumstances going forward, Mr. 3 Mayer recommended a methodology for updating Metropolitan’s functional assignment of 4 demand management program costs after 2020. 5 28. In a second phase, Richard Giardina, Senior Vice President of Raftelis, conducted 6 an analysis to incorporate the phase one recommendations into the cost-of-service process and 7 develop demand management cost recovery mechanisms, whether through Metropolitan’s 8 existing rate and charge structure or alternative cost recovery mechanisms. Mr. Giardina issued a 9 Demand Management Cost Recovery Alternatives Report in December 2019, in which he 10 concluded that four proposed alternatives, some of which involved the allocation of costs to the 11 conveyance function in Metropolitan’s rates, were each reasonable and consistent with industry 12 guidelines and standards. Mr. Giardina advised that it was a policy decision of the Metropolitan 13 Board to determine which alternative is most appropriate for Metropolitan to adopt. 14 29. In December 2019, the Metropolitan Board considered the proposed alternatives 15 for a future demand management cost recovery mechanism, and decided to continue the study 16 through a rate refinement workgroup of staff representatives of the member agencies. 17 Consequently, the Board voted in April 2020 to suspend use of the Water Stewardship Rate in 18 2021 and 2022 during the workgroup’s efforts, and to fund demand management in these years 19 with reserve funds from the Water Stewardship Fund. The member agency rate refinement 20 workgroup study, which includes San Diego, continues to date, along with Metropolitan’s work 21 on its most recent IRP update. 22 30. By the time it adopts rates in April 2022 for 2023 and 2024, the Metropolitan 23 Board is expected to consider the most appropriate cost recovery mechanism for demand 24 management costs for the future. The Water Stewardship Reserve fund, relied upon for demand 25 management funding commitments in 2021 and 2022, is not sufficient to maintain indefinite 26 funding of demand management costs, particularly with the new commitments for local resource 27 projects Metropolitan has entered into with San Diego. 28 01143.0001/704061.2 CMC 11 MUNICIPAL WATER DISTRICT OF ORANGE COUNTY’S ANSWER TO 1ST AM. PETITION 1 31. In SDCWA, 12 Cal. App. 5th 1124, the Court of Appeal in part considered the 2 sufficiency of the record for the years 2011 to 2014 to support Metropolitan’s inclusion of the 3 Water Stewardship Rate in the pre-set wheeling rate. Based on the record before it, the Court held 4 the pre-set wheeling rate was valid, except to the extent this included the Water Stewardship Rate 5 component. The Court found the record for 2011 to 2014 lacked substantial evidence to support 6 including the Water Stewardship Rate in those years. SDCWA, 12 Cal. App. 5th at 1130, 1149, 7 1150-51. The Court of Appeal’s decision did not address Metropolitan’s inclusion of the Water 8 Stewardship Rate in the pre-set wheeling rate in subsequent years, including the years at issue in 9 the present case, based on a different record with additional support for allocating demand 10 management costs to transportation rather than supply. 11 32. San Diego not only seeks invalidation of the Water Stewardship Rate’s inclusion 12 in the pre-set wheeling rate, but also seeks a writ of mandate prospectively commanding 13 Metropolitan on the manner of setting the pre-set wheeling rate and demand management cost 14 recovery in the future. 15 33. However, in August 18, 2020, the Metropolitan Board of Directors repealed the 16 pre-set wheeling rate and Resolution 8520. By that time, no transactions governed by the pre-set 17 wheeling rate had occurred in over 10 years. Since the Board’s action in August 2020, the price 18 for all wheeling by member agencies, regardless of duration, will be set based on each 19 transaction, as is the case for third-party wheeling transactions and wheeling to member agencies 20 for more than one year. And, as stated, the Metropolitan Board has suspended use of the Water 21 Stewardship Rate pending its forward-looking demand management cost recovery study. 22 34. San Diego also alleges in its fifth cause of action that Metropolitan’s rates and 23 charges for the services it provides to its member agencies are subject to the requirements of the 24 constitutional provisions added by the passage of Proposition 26 in 2010. However, those 25 requirements apply to exactments that are “imposed” on ratepayers. For multiple reasons, 26 Metropolitan’s rates and charges are not imposed on San Diego or its other member agency 27 ratepayers. Metropolitan is a voluntary cooperative of its member agencies, and is governed by a 28 Board of Directors comprised only of the representatives of its members. Metropolitan has only 01143.0001/704061.2 CMC 12 MUNICIPAL WATER DISTRICT OF ORANGE COUNTY’S ANSWER TO 1ST AM. PETITION 1 26 customers – its 26 member agencies – and those customers through the representative Board 2 set the rates and charges that are applicable to themselves and no others. Consequently, the rates 3 and charges are voluntarily set by the customers, including San Diego, which comprise a 4 voluntary cooperative. Metropolitan’s rates and charges are also not imposed because San Diego 5 is not required to utilize Metropolitan’s system. The Court of Appeal has not yet decided the issue 6 of whether Metropolitan’s rates and charges are imposed and, therefore, whether Proposition 26 7 applies to Metropolitan’s rates and charges. SDCWA, 12 Cal. App. 5th at 1152-53 (noting 8 Metropolitan’s position that Proposition 26 is inapplicable because its rates are not imposed; 9 declining to decide that issue by holding “whether or not ‘imposed’” the System Access Rate and 10 System Power Rate comply with constitutional requirements). In any event, Metropolitan’s rates 11 and charges are collected for a service and do not exceed the reasonable costs of providing the 12 service and/or are fees for the use of Metropolitan’s services. The manner in which the rates and 13 charges are allocated to a member agency bears a fair or reasonable relationship to the member 14 agency’s burdens on, or benefits received from, Metropolitan. 15 16 SPECIFIC AFFIRMATIVE DEFENSES 17 MWDOC asserts the following affirmative defenses to the claims for relief made against it 18 in the FAC without admitting it has the burden of proof on any of the issues raised below: 19 First Affirmative Defense 20 (Failure to Name Real Parties in Interest) 21 MWDOC incorporates by reference the General Allegations stated above. 22 San Diego fails to name the 25 other Metropolitan member agencies, whose interests are 23 directly at issue in this litigation and in whose absence complete relief cannot be accorded 24 among San Diego and Metropolitan, pursuant to Code of Civil Procedure § 389(a). 25 Second Affirmative Defense 26 (Failure to State Facts Sufficient to Constitute a Cause of Action) 27 MWDOC incorporates by reference the General Allegations stated above. 28 01143.0001/704061.2 CMC 13 MUNICIPAL WATER DISTRICT OF ORANGE COUNTY’S ANSWER TO 1ST AM. PETITION 1 San Diego fails to state facts in its FAC sufficient to constitute a cause of action on which 2 relief can be granted. Among other grounds, San Diego fails to state a violation of Proposition 26, 3 i.e., Article XIII C, § 1, subdivision (e) of the California Constitution (adopted by Proposition 4 26), Government Code § 50076, Government Code § 54999.7(a), Government Code § 66013, 5 Water Code §§ 1810 et seq., the Metropolitan Water District Act, or the common law, and/or 6 these laws are not applicable to the facts alleged in the FAC. Moreover, San Diego fails to allege 7 it engaged in any transaction with Metropolitan that is subject to the pre-set wheeling rate it 8 challenges in the first through third causes of action, which was previously set by the 9 Metropolitan Board of Directors pursuant to former Metropolitan Administrative Code Sections 10 4119 and 4405. 11 Third Affirmative Defense 12 (Statute of Limitations) 13 MWDOC incorporates by reference the General Allegations stated above. 14 San Diego’s claims are barred in whole or in part by the applicable statutes of limitations, 15 including but not limited to, Code of Civil Procedure §§ 337, 338(a) and 343, Government Code 16 §§ 945.4, 945.6, and 945.8. 17 Fourth Affirmative Defense 18 (California Government Claims Act) 19 MWDOC incorporates by reference the General Allegations stated above. 20 Those portions of San Diego’s claims for relief that may implicate the California 21 Government Claims Act, are barred in whole or in part because San Diego failed to comply with 22 all provisions of the Government Claims Act, including but not limited to Government Code §§ 23 901, 905.2, 910 et seq., 911.2, 911.3, 911.4, 935, 945.4, and 946.6, and the Metropolitan Water 24 District of Southern California Administrative Code §§ 9300-9310, including by failing to timely 25 file a claim, and failed to timely file a court action relieving it from its failure to timely present a 26 claim, as required by Government Code §§ 945.4 and 945.6, and the Metropolitan 27 Administrative Code. Among other reasons, San Diego did not reference “offsetting benefits” 28 anywhere in its written communications to Metropolitan (attached to the FAC). San Diego 01143.0001/704061.2 CMC 14 MUNICIPAL WATER DISTRICT OF ORANGE COUNTY’S ANSWER TO 1ST AM. PETITION 1 does not allege it made any such request to Metropolitan, as a claim or otherwise. The 2 monetary relief sought in the FAC is barred by the claim presentation requirements in 3 Government Code §§ 900 et seq. 4 Fifth Affirmative Defense 5 (Laches) 6 MWDOC incorporates by reference the General Allegations stated above. 7 San Diego’s claims are barred by the doctrine of laches. 8 Sixth Affirmative Defense 9 (Exercise of Administrative Discretion) 10 MWDOC incorporates by reference the General Allegations stated above. 11 Metropolitan has no ministerial duty to structure its rates in the manner alleged by San 12 Diego. Rather, the legal directives under which Metropolitan operates broadly leave the design of 13 water rates to Metropolitan’s sound discretion and the majority vote of Metropolitan’s Board of 14 Directors. 15 The applicable legal standards for Metropolitan’s rates are reasonableness, resulting in 16 revenue which will pay the costs of the district, and uniform for like classes of service. 17 Metropolitan’s principal act, the Metropolitan Water District Act, states that Metropolitan “shall 18 fix the rate or rates at which water shall be sold” (Cal. Water Code § 109-133), and that those 19 rates shall recover sufficient revenue, together with other sources of revenue, to fund all of 20 Metropolitan’s costs and “shall be uniform for like classes of service throughout the district” (id. 21 at § 109-134). The state common law applicable to Metropolitan’s rates calls for rates to be 22 reasonable. The California Supreme Court has stated: “Reasonableness . . . i